Ancillary fund landscape revealed
23 January 2020 at 8:21 am
New data shows the number of Private Ancillary Funds is on the rise. But the number of Public Ancillary Funds is falling. We take a look at what this means for the ancillary fund landscape.
At the end of 2019, the Australian Centre for Philanthropy and Nonprofit Studies published its analysis of the public and private ancillary fund data from the 2016-17 financial year – which is the most up-to-date data publically available.
What are ancillary funds?
Ancillary funds are special funds that provide a link between people who want to give and organisations that can receive tax-deductible donations. Ancillary funds are set up for the purpose of providing money, property or benefits to DGRs.
There are currently 2,799 ancillary funds, with combined net assets of $11.98 billion. In the 2016-17 financial year, they received $1.53 billion in donations and distributed $919.90 million in grants.
The data break-down found that the number of Private Ancillary Funds (PAFs) – which are privately-owned charitable trusts – has been on the rise since the global financial crisis in 2008.
During the 2016-17 financial year, 139 new PAFs were approved, bringing the total number to 1,495.
But report researcher Alexandra Williamson told Pro Bono News that despite the growing number of PAFs, donations and grant distributions remained steady, and actually represented the slowest annual growth since 2011.
“Possibly it means that the return on investment they’re achieving is very good and that’s contributing to their net assets… but I think the fact that the donations remained steady is a little unexpected,” Williamson said.
She said it’s possible that this would increase in 2019-20 in line with the response to the bushfires and large donations made by PAFs such as the Paul Ramsay Foundation.
She also noted that the percentage of distributions in 2016-17 had fallen to 5.43 per cent, sitting just above the mandated minimum of 5 per cent.
But this isn’t all bad news for community organisations seeking those distributions.
“The steady growth in the assets that they hold means their minimum distributions are going up as a consequence because the total value of that is going up,” she said.
A different picture for Public Ancillary Funds
The picture for Public Ancillary Funds (PubAFs) – which are a common structure for community and fundraising foundations and different from PAFs in that they must establish a public fund and raise funds from the public – is quite different.
In 2016-17 there were 1,304 PubAFs, with 68 new funds approved during the year. This is nearly 150 fewer than the previous year.
Williamson explained this is probably because of “rationalisation”, which is where one organisation has set up a number of ancillary funds and has realised over time they can combine them into one.
The analysis also found that donations to PubAFs dropped from $750 million in 2015-16 to $690 million in 2016-17.
While a drop in numbers might not look good, Williamson said an increase in distributions balanced this out.
“The fact that their distributions are increasing is really positive. It shows that those public funds are not just holding a capital base and distributing the income that they generate from that,” she said.
“So I think they’re doing a really great job of getting money in the door and fulfilling their mission by distributing it for public benefit purposes.”
Work to be done
Williamson said that even though this is not the most current data, it does provide context to the broader picture of the philanthropic sector, and highlighted the areas that needed attention.
“Particularly when you look at PAFs, which are seen as a really fast-growing and exciting in the sector… but I think a better adjective for the moment is steady growth,” she said.
“This data shows the growth rate in these organisations is perhaps not what we might want or expect and that we can perhaps explore ways of engaging new philanthropists around the Private Ancillary Fund model.”
A full copy of the 2019 report can be found here.